New N.C. law encourages mediation in HOA disputes

Published: Tuesday, July 2, 2013 at 10:31 a.m.

Last Modified: Tuesday, July 2, 2013 at 10:31 a.m.

A measure encouraging mediation prior to civil court action in disputes between homeowners and their associations is among new North Carolina laws taking effect this month, but several other bills pushed by those seeking HOA reform have stalled.

Facts

Signed into law: A measure encouraging mediation prior to civil court action in disputes between homeowners and their associations A bill seeking to bring uniformity across all 100 counties for enforcement of condominium and HOA liens by incorporating a trustee in foreclosure cases, similar to bank foreclosuresStalled: A bill to require HOA managers to be regulated by the N.C. Real Estate CommissionEfforts to require all HOA board members to receive N.C. Real Estate Commission-sponsored education on HOA governance regulations within 60 days of an electionA bill to remove the foreclosure powers of HOAs

The new law was sponsored by Rep. Duane Hall, D-Wake.

"Although nothing in this bill is mandatory, I do feel that it provides a less costly or messy option for people in disputes with their HOA," said Hall, a real estate attorney.

Hall said the measure essentially offers North Carolina's current mediation system to homeowners in disputes over things like a barking dog, where a fence can be placed, the color a house can be painted, or the type of shrub one can plant in his or her front yard.

"It does not open mediation to disputes over HOA dues or assessments," he said.

But one local advocate for homeowners' association reform says it's a weak law that lacks teeth, amounting to little more than lip service to reform of homeowners' associations.

"It's worthless because no one will agree to it," said Ole Madsen, of Supply.

Madsen sits on two HOA boards and oversees an organization called Homeowners for Education, Advocacy and Rights, or HEAR4NC.

"It should be mandatory mediation, and the HOA should pay for the mediator," Madsen said.

Voluntary mediation should already be a policy of HOAs, Madsen said, calling it a "normal life thing to do."

Other bills calling for reform of HOAs have not moved this legislative session, despite lengthy hearings on the subject last year that led to a list of recommended strategies for reform.

Among those measures, House Bill 871 would require that homeowners' association property managers be regulated by the N.C. Real Estate Commission as brokers. House Bill 883 would require HOA board members to receive at least four hours of education on HOA governance sponsored by the Real Estate Commission within 60 days of their election. House Bill 175 would have removed the ability for HOAs to foreclose on homeowners.

Madsen said he is confident that the former two bills may be considered during the short legislative session after the first of the year.

Rep. Frank Iler, R-Brunswick, a primary sponsor of HB871, agreed that there could be movement next year. He said there's ongoing communication with the Real Estate Commission.

"At first they were not sure what it would involve for them to regulate HOAs," he said of the Real Estate Commission. "Now the conversations are going better, and they might be OK with it, but it's a little late in the session."

Iler said that when it comes to HOA reform, "something needs to be done correctly."

"It's not something we need to rush into and create a whole sub-bureaucracy under the Real Estate Commission," he said. "It just needs more work before we come out with it, and we need to make sure we consult with all the stakeholders."

A spokeswoman for the Real Estate Commission said the entity is neutral on the legislation and will act in accordance with whatever laws are put in place by the General Assembly.

Another measure dealing with HOAs this legislative session, signed into law by the governor, seeks to bring uniformity across all 100 counties for enforcement of condominium and HOA liens when property owners fall behind on assessments by incorporating a trustee in foreclosure cases, similar to bank foreclosures, according to the bill sponsor.

Madsen said he's concerned the new law will make it easier for HOAs to foreclose on homeowners, though Rep. Rob Bryan, R-Mecklenburg, says it is neither an expansion of HOA powers nor consumer rights.

"We were trying to create a bill that really just brought some clarity and uniformity to an existing process," Bryan said.

Regardless, Madsen says his organization, HEAR4NC, is slowly making progress, though it has no registered lobbyist nor does it boast a grand membership.

Madsen said he walked the hallways of the Legislative Building this session drumming up support for HOA reform and has grown his organization's membership base to 30. It costs $5 to join.

"We've been successful in many markets picking up membership and support," Madsen said. "We're unknown. We have no money. The people that have joined are passionate. One person can do the work of 10."

Nationwide, one in five is in an HOA.

Neighborhood associations generally oversee amenities such as pools and tennis courts, as well as, in many cases, municipal type functions such as road maintenance and garbage pickup. HOAs may even manage building insurance, and often rule over matters of aesthetics. Members pay dues in exchange for these services.